Bread Financial Holdings, Inc. (BFH)

Investor Day 2021

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May 18, 2021

Good morning. On behalf of the Board of Directors of Alliance Data, I'd like to virtually welcome all of you to today's investor event. The past year and a half has been a transformational period for the company. We've put in new leadership, strategy and direction for the company. It was also exciting for me to get back together again with Ralph. He and I worked together thirty years ago at American Express, and he provides a unique combination of operational leadership, day to day operations controls and sound strategic thinking as well as a vast background in financial services. We're proud of the way the company and Ralph stepped in to support our associates, partners, card members and communities during the pandemic. Ralph and the leadership team have an exciting year for you today to highlight the remarkable changes they've made and the opportunities that lie ahead for Alliance Data. Welcome, everyone, and thank you for joining us today. My name is Brian Verab, Head Head of Investor Relations for Alliance Data. Before turning the event over to our President and CEO, Ralph Andreta, I will quickly review the agendas and disclosures for today's event. I should remind you comments made during today's meeting and some of the responses to your questions may contain forward looking statements. These statements are subject to the risks and uncertainties described in our filings with the SEC. Alliance Data has no obligation to update the information presented during the event. Also, during today's meeting, our speakers may reference certain non GAAP financial measures, which we believe will provide useful information for investors. Reconciliation of those measures to GAAP will be posted on the Investor Relations website at alliancedata.com. Ralph will begin today's event with brief overview of the company before he joins John Grund, a well recognized adviser to the payments industry for a discussion on Alliance strategy and outlook. Then our Card Services Executive Vice President and Chief Commercial Officer, Val Greer, will go deeper into our Payment Services business, focusing on our enhanced digital capabilities and growth opportunities. Next, Executive Vice President of Card Operations and Credit Risk, Tammy McConaughey, provide insights into our lending philosophy and credit outlook. Finally, Ralph will provide our long term financial targets and closing thoughts. As far as logistics, we have planned for a ten minute break around the hour mark of the event. We will also have a brief Q and A session after both Val and Tammy's section. At the conclusion of the presentation, Ralph and the leadership team will take your questions. With that, I would like to welcome Alliance Data President and CEO, Ralph Andretta. Thanks, Brian, and thanks to everyone for joining. We are excited to have you with us today. Although we would have had preferred to host an in person event, we are excited to demonstrate how Alliance Data is uniquely positioned in the marketplace to drive sustained, profitable growth for our shareholders. I want to start by presenting our Board of Directors. The board's guidance and counsel have enabled us to swiftly chart our way forward. First, our newest board members, John Gershbach and Rajesh Naharenjan. John's financial services experience, audit, and risk expertise added deep insight to our board and committees, while Rajesh has an extensive and impressive resume in technology and product development. We continue to expand and enhance our board's value with the addition of Karen Kimbrough to our slate of nominees. Karen serves as chief economist at LinkedIn and is a member of the board at Fannie Mae. Upon election at the annual meeting later this month, Karen will join John, Rajesh, our chairman, Roger Baloo, from whom you just heard from, Laurie Tucker, our attorney, Tim Fiorelt, and me. Our very experienced and knowledgeable board is a valuable asset to Alliance Data. Our ongoing board refreshment strategy has substantially changed the makeup of our board over the last seven years with seven new independent directors nominated in that time. The program has also significantly reduced average tenure and increased diversity while expanding the breadth and depth of expertise. Our board represents both gender and ethnic diversity with three female directors following this year's annual meeting, two of which will serve as committee chairs. In summary, we have a diverse board with the breadth and depth of skills and expertise to match the oversight needs of our evolving business. Next, I'd like to introduce you to Alliance Data's impressive and diverse leadership team. Today, you'll hear from Tammy McConney, who leads our operations and credit risk functions and has nearly thirty years of experience at Alliance Data, as well as Val Greer, who will join us as our chief commercial officer in 2020. Val formerly held executive positions at Citi and JPMorgan. We are excited to welcome Perry Bieberman, who will be joining the company in July as our CFO. Perry brings deep financial industry expertise and thirty plus years of experience at Bank of America and MBNA. I'd like to take this opportunity to highlight a few milestone events that have occurred in the past year and a half. We are thrilled to celebrate our twentieth anniversary as a public company in 2021 and are excited to see what the next two decades will bring. Alliance Data continues to evolve and reposition itself for future sustained success. As we announced last week, we plan to spin off our LoyaltyOne segment. This transaction fulfills the goal of simplifying our business story and narrowing our focus while unlocking the growth potential of both companies. Further, the transaction is expected to strengthen Alliance Data's balance sheet and improve key metrics. For today's presentation and q and a, we will focus solely on our payments business. February marked my one year anniversary with Alliance Data. The strong culture continues to impress me. We were able to learn and adapt through the pandemic and made responsible strategic investments and improvements in our business despite a challenging macroeconomic environment. From a talent perspective, we added new talent and industry veterans with extensive experience across the financial and operational sectors. From a capabilities perspective, some of our key milestones included introducing the Comenity card, launching the enhanced digital suite, transitioning our core processing to Fiserv, the acquisition of Bread, the Bread and Royal Bank of Canada strategic relationship, and most recently, the Bread Fiserv strategic relationship. With the acquisition of Bread came innovative talent. The addition of installment loan, buy now, pay later products, which rounds out our product suite, and an advanced digital platform that opens up new valuables. We will continue to invest in our digital and data and analytics capabilities while working with our partners to drive sales. We continue to build momentum with the execution of our recover, rebuild, and regrow initiatives. It has been both a challenging and rewarding first year at Alliance Data, and I'm proud of all we've accomplished over such a short period of time. We stepped up for our employees, our partners, our card members, and our communities. We've demonstrated resiliency and sustainable responsible business practices, which helped us through our recover actions. We are now focused on the rebuild and regrow elements of our plan. We will continue to invest in digital to remove from from the customer shopping journey and enable easier self-service. These enhancements will result in operational efficiencies, but it will allow us to self fund investments going forward and drive positive operating leverage. Rebalancing our portfolio for sustained profitable growth remains key to our success. We will maintain prudent balance sheet management to better align with our peers, and we'll grow with new verticals, clients, and products. We are confident our balanced approach to risk will ensure we provide our shareholders with an advantage return on their investment. Tammy will address our risk management strategy in her section. Our go forward strategy revolves around four main pillars. First, we offer a robust product suite focused on customer choice. If we offered only one payment method, we'd be missing out on 40% of the customer's preferred way to pay. Our products can be offered to consumers directly like our Comenity card or through a white labeled or partner branded option. The white label or partner branded option offers the payment product in our partner's voice enhancing their brand and is a differentiator compared to the competition. The addition of Brad's buy now, pay later payment solutions expands our consumer base into a younger, digitally native demographic. Those that are new to credit or are budget conscious will gravitate towards our buy now, pay later option. Especially among millennials, this offer is an appealing budget and cash management tool. Our card products tend to appeal to a more diverse population. Therefore, we are able to use our full product suite to support consumers across their lifetime shopping experiences. Through the use of our product graduation strategy, we can continue to engage consumers as their needs evolve by ensuring that the right product is available at the right time. Second, we provide a full spectrum of lending capabilities to drive sales. Our ability to approve more applicants with our advanced underwriting tools and historic data sets us apart from our competitors. Third, we will continue to enhance our capabilities with an emphasis on digital. Our digital enhancements have been a focal point of our new direction and are accelerated with the acquisition of Bread. We continue to invest thoughtfully to adapt to an ever changing omnichannel world. Finally, we are committed to driving sustainable, repeatable, profitable growth. We will continue to evaluate our current portfolio and future opportunities, prioritizing those that expand the entire economic pie for us and our partners. Our goal is to achieve top tier metrics and exceed $20,000,000,000 in receivables by 2023. In addition, we anticipate that bread's gross merchandise volume or total platform sales will approach $10,000,000,000 by the end of twenty twenty three. I will go into more details on the long term financial targets later in the presentation. Before I welcome John Grun to the stage for our industry discussion, I would like to share the following video highlighting our approach to doing business at Alliance Data. And But it's not just what we are doing, it's how we are doing it that will drive our performance. Ethical decision making, achieving sustainable growth through integrity, transparency and ethical actions strength in leadership and sound governance with active Board oversight and a strong focus on risk management proactive stockholder engagement, gaining trust through transparency, active dialogue and disclosure operational excellence, delivering on our promises, striving for excellence in all we do and for all those we serve Investing in our associates, cultivating an inclusive and healthy workplace where diverse backgrounds, experiences, perspectives and skills are valued. And empowering our communities and respecting the environment of our also value and drive growth. We are are proud to say that to that to say 40 four percent of our leaders are women, and we are consistently recognized as a diverse employer and will continue to strengthen our Inclus culture through the completion of a formalized diversity, And think outside the bank as the leading tech forward financial solutions provider, serving people and their passions for a better life. This is what we stand for, and our actions exemplify who we are. Are nimble, curious, bold, trustworthy and authentic. We are confident in the direction we are going. We will remain steadfast in our approach to operating response and that enables us to drive long term profitable growth and shareholder value. We are Alliance Data. I hope you enjoyed the video highlighting our responsible business practices and the linkage between our business strategy and the commitments to our key stakeholders, which drives our long term success. Our goal every day is to create value for our investors, our brand partners, our card members and customers, our employees, and our communities. It's not just what we are doing, it is how we are doing it. That drives our performance. Diversity, equity, and inclusion is a top priority for Alliance Data. Our annual environmental, social, and governance performance report comes out in the second quarter and will further showcase our commitments and the progress we're making to demonstrate our responsible business practices. As a company, we are focused on our vision, which is thinking outside the bank as a leading tech forward financial solutions provider serving people in their everyday lives and passions. Now I'd like to introduce John Grund. John is a recognized adviser to payments industry. He was an early partner of First Annapolis where he spent over twenty years before its merger with Accenture. His clients include large banks, retailers, airlines, and financial service providers. As background, I have had the opportunity to work with John both as his client and when he was advising partners on the other side of the table. He is uniquely suited to facilitate a candid industry discussion as he is as close to the market as anyone. John, welcome and thank you for joining us today. Ralph, great to be here. Let's hit this head on. Mean, '20 was quite a year to take on the roles as a new CEO. Looking back, what gave you the confidence to take the leap to running an organization like Alliance Data? John, I've been part of really large organizations in financial service for the last thirty years. A lot of different roles. CFO, Head of Re engineering, Head of Product, and then finally Head of a Portfolio. This gave me the opportunity to turn a company around in a smaller venue, not a big multinational, but in a smaller company, to turn it around and be ultimately accountable for the decisions that were gonna be made. That that was exciting for me and engaging. You know, John, it's a real privilege to be a public CEO. It's exciting for me. And I'll be very frank with you. This is probably my last big job. And I really have the opportunity to do it right, to do with people I admire, people I I I think are terrific leaders, and leave a terrific legacy. And that's what's what's important. That's why I made the switch. Interesting. Well, speaking of interest, three weeks from the job, the pandemic shut down much of The US and the world for that matter. I'm sure that made things a bit more interesting for you. So if you could, take us through your thinking about this this event. Yeah. Well, I had three good weeks, and then, you know, the pandemic hit. But, you know, it did a number of things. It really helped galvanize my thinking about what had to be done. It really highlighted the weaknesses at Alliance Data, and we had to solve those. Secondly, it really helped me pick my team. Who were the field generals? Who were the people I can count on right away? And third, it highlighted the gaps that Alliance Data had in terms of products and capabilities in a very short period of time, probably shorter than it would have been had the pandemic not hit. I knew who the players were. I knew who the real leaders of this organization were. And as important, I knew who they weren't. And I knew where I had to bring people in Mhmm. To kind of fix that. And we did that, and I'm really excited about our leadership team. Our lack of digital in the beginning was was apparent as people were just pivoting towards digital and no one would there was no mall traffic. Acquisitions were down. Sales were down. Everything was going online. And we had to really up our game in digital and other capabilities for our for our customers and our partners. Ralph, as The US makes progress in battling the pandemic, what do you see as the lasting effects of the pandemic on business, industry, consumers? And specifically, can you speak to fintech and buy now pay later, just how front and center that is in the industry right now? Sure. You know, I think the pandemic's taught us a number of lessons, and we have to adapt to those lessons that they've taught us. One is, you know, the switch of employees from in the office to home was overnight. And, you know, we we made it work. And employees seem to like it. And I think going forward, I think you're going to see more work at home employees. And we as leaders have to figure out how to work with top talent. And if top talent wants to work at home or work in different locations, we've got to accommodate that. That, I think, will last way beyond the pandemic. There's an upside for industry. There's an upside for us because I was able to shed half my real estate. So when you shed half your real estate, half your real estate costs and your infrastructure, you kinda reduce your cost to serve. But I think we have to be able to work with people wherever they wanna work and how they wanna work if we wanna retain top talent. I think that's critically important. The second thing is we've gotta be where our customers wanna shop, where they are, how they wanna interact. You know, if the pandemic taught us anything, digital is front and center, and omnichannel is front and center. They wanna they wanna have choice, and we have to give them choice. And wherever they wanna be, we've gotta be there. And I think we've done a nice job over the last year and a half getting there. You know, the buy now pay later, which goes along with digital and and and fintech, was critically important a critically important piece for us to get into. And in 2020, in the midst of the pandemic, we acquired Bread. We acquired Bread for a number of reasons. One, it had products that we did not have. We did not have buy now, pay later. We did not have installment loan, and we were losing volume to competitors. And so we had to kind of think, how do how do we wanna stem that? And the way you stem that is, you know, three ways. Either you you build it, you buy it, or you partner. Building wasn't an option because it would have taken us fourteen to twenty four months. I've been down that road before. Partnering is interesting, but you don't own the customer. It's you know, you borrow the customer. So we decided to buy it, and we found a terrific part in bread. They're innovative. They're focused on the future. They're focused on the consumer, and they have terrific technology and a terrific pipeline of opportunity. So the buy now, pay later functionality just opens up a whole new demographic that Alliance Data didn't have before in terms of millennials. Millennials tend to lean away from credit and are more budget conscious and cash flow conscious. And buy now, pay later just fills that gap for them. Great. Looking forward, this massive shift to digital that has occurred, does it put the nail in the coffin of wall based retail, which you still have a pretty significant presence in? Any thoughts up front? Yeah. You know, I get that question a lot, John, and it's an interesting question. And this is just the way I view it. People are social creatures. You know, they wanna get out. They wanna be social. And the mall is an interesting place to do that. And I think the malls are evolving too, in terms of features and meeting places. And the stores in the mall, I've noticed now, are more of showcases than places to buy. It's pretty interesting. So you you go to the mall, you look at things, but you go buy it online. So we've gotta be there online to buy it. You know, I I there was a recent article, about mall traffic in in the journal, and it said it's almost back to where it was pre pandemic twenty twenty. Not quite back, but pre pandemic twenty twenty, the mall traffic's back. And I think with the vaccines and the, you know, spring and summertime coming, I think you're gonna see people going back to the mall. Doesn't mean we're going back to the way we did things. You know, we've learned we've got to be omnichannel. So we've got to, you know, kind of de risk our portfolio. I still want to be in the mall, but I certainly want to be online. Now with so many new competitors entering the space, and as you know, we know the industry has always been, you know, competitive, how is Alliance Data going to differentiate itself and stand out, you know, going forward with with pieces that you've put together here? That basket of products offering offering to the to the to the partner and customer, I think that's key for us. You know, we used to be a one trick pony. We're not a one trick pony anymore. We have multiple products that can entice customers and enhance our partner's brand. That's what we're going to focus on. You know, secondly, we are good quick decision makers. You know, with the bigger banks, there's usually some bureaucracy. When I was at the bigger banks, I was on four or five committees you had to get approval for to move forward on a variety of things, business practices, control and compliance, you know, a whole host of them. We do all that but within my leadership team. We make the decision with the partner and we pivot and move forward. Speed to market is going to be key, and we can do that. And third, we're upgrading our technology. We've outsourced our core technology, our traditional Alliance Data technology to Fiserv. It just gives us amazing capabilities as we move forward. Ease of integration, better bank consolidation capabilities. And they're innovators, and we're to innovate with them as we move forward. I think those things really makes us more competitive than we've ever been. You mentioned a few moments ago the Comenity General Purpose Card. Stepping back, how does Alliance Data think about opportunities that are nontraditional or non not in the core partnership space? You know, what is are there direct to consumer ambitions? And what fits your profile looking forward? Yeah. I think listen. We'll we'll we'll always be in the private label space. That's what, you know, that's what made this company. And I don't see us being out of that private label space. It's in our DNA. So we'll always be there. But acquisition of bread and their capabilities really gives us an opportunity to go direct to consumer. If you think about our partners our partner base before bread, we had a 30 partners. We've now ballooned to 650. They're small and medium sized partners. Those are direct to consumer. We're using the bread brand to attract consumers to Alliance Data now. So that's a direct to consumer brand. I see us growing the Comenity card. I think it's a good card. I think it's a good way to grow receivables and kind of get rid of a little bit of our risk in terms of concentration risk. Think that's important too. But it just opens up a whole new number of customers to us, small and medium sized customers that we can integrate within forty five days, probably less. So that's exciting. That's exciting for us. It's a, you know, it's a different a different new revenue stream. Okay. Ralph, you got a lot on your plate, state the obvious. Can you talk about how it all comes together as you start to execute and deliver? You know, it it all comes together through the banner of leadership. I have a terrific leadership team that is focused on the future and focused on returning great value to shareholders and building a legacy in this company. That's a gig. As the pandemic gets more and more in our rearview mirror, I hope, we're starting to see sales come back, which I think is critically important, really important for us. We're seeing four things. One is that sales are going to increase with our current partner base. We're going to go deeper in that current partner base because we have more products and services and capabilities than we've ever had. So we're dig a little deeper in that base and drive some volume. Bread brings us partners we never had before and a revenue stream we've never had before. So that's really exciting for us. And fourth, we're going to be able to compete more effectively in the marketplace for those renewals and RFPs that come out and partners because we have this basket of products. And again, our decision making is quick and we execute on it. So I'm excited about the future. Great. Sounds interesting. With the new administration, pulling up a few levels. So with the new administration taking shape in DC, what concern do you have and how will Alliance Data work through any changes and react to any changes? Yeah. Well, whatever the administration is, you have to lean into it. You've got to work with that administration. You and I lived through CARD Act. That was probably the most sweeping changes ever to the card industry. It made us more innovative. It kept us on our toes. It made us creative in terms of how to get through that. And I think that's what you have to do. So, you know, the industry administration is gonna do what they think is right for, you know, for the country, and we're gonna lean into it. And we're going to be smart about it and and work through it. You know, like I said, just keeps you on your toes. Great. Pulling all the way up, are there any additional areas of focus or parts of the Alliance Data story that don't hit the headlines that that you'd like to kind of project out? You know, yes. You know, we're being more transparent and forthcoming with analysts. I hope they appreciate that because that's important. We are putting commitments out there, and we're hitting those commitments. I want the analysts to kind of measure us by what we're doing and how we're doing it rather than what we're saying. And and I think that's important for us, that the analysts recognize that we're we we told them we would take steps. We're taking those steps. We told them what our commitments would be. We're meeting those commitments, and we're very focused on on continuing to do that and continuing to be transparent. Along the same lines, what should investors get excited about thinking about Alliance Data? I think they should get excited about our leadership team. You know, our leadership team is exceptional. They get it they should excited about the prospects that bread brings to us. We never had that before. I think that's something to be excited about. You know, we've demonstrated that we've taken decisive action to position the company for the future. I think that's critically important. You know, the other thing we've done is we've increased our total addressable market. We've it. You know, bread really expands that for us. Our product groups really expand that for us. Our addressable market is bigger than it's ever been before. The reduction of our infrastructure and how we're going to work going forward, that's something to be excited about. All of these things contribute to, you know, driving positive operating leverage in the future. And to be excited about our data and analytics, we have more information on more customers. You know, we're a bit of a closed loop in private label as you know. We've got more information on more customers and we can we we can turn that to decisionable data and information and be very focused on how to drive spend for our partners and how to really deliver good payment options for our customers. Those are the things I'd be excited You know what I would tell our investors? That we have the discipline and governance of a public company, but the heart and curiosity of a fintech. That's a great combination. Ralph, great discussion. That's all I have for today. Pleasure to be John, thank you for coming. It was a pleasure to talk to you, and I hope to see you soon. Likewise. Now I'd like to introduce Val Greer, our Chief Commercial Officer, to talk about our products and partnerships. You know Val, we've worked together for almost a decade. We were part of the biggest co brand transition in history and I couldn't be prouder to have you by my side to transition Alliance Data. Val, welcome and take it away. Thanks Ralph. Exciting times and happy to be here to share all the great work we have done. I'm pleased to provide updates for our Card Services business. I'll highlight our product offerings, our recent investments and our opportunities to drive continued growth. But before I jump in, I will hand it over to our new SVP of Digital Strategy and Experience, Deshaun Willeford and our Head of Bread Products, Perlee Wang to show you the exciting developments that we have brought to market and what we have in store for the future. Hello. I'm Deshaun Bulliford, SVP, Digital Strategy and Experience at Alliance Data. Today, I'm excited to show you one of those capabilities, our enhanced digital suite. EDS is a unified suite of digital capabilities that drive awareness early in the shopping experience through presentment of contextually relevant and personalized messaging and the ability to apply and buy with instant spend upon account approval in store or online using a digital shopping pass with a specific use payment token. Whether someone is looking for a one time or multi purchase payment option, Alliance Data's enhanced digital suite powered by the Bred platform will allow the presentment of a breadth of purchasing products from split pay to private label, co brand or installment lending, all through a simple and easy merchant integration. Rest assured, data and analytics are at the core of what we do and our data driven product recommendation engine will inform what, how and when we present relevant offers to consumers. EDS is just one of the exciting new digital advancements on the horizon. In the coming weeks and months, I'll share two more key capabilities: a modernized digital platform and account center. We'll introduce an improved look and feel to all customer facing digital properties and navigation engine. We'll also overhaul our security and identity verification capabilities through a partnership with an industry leader. We'll optimize the rewards redemption process, making it easier and more flexible for customers to redeem rewards and retailers to provide bonuses to their most loyal customers. Watch as my colleague, Perrily Wang, shows you how we're unifying ADS and Bread products into a singular experience for our clients. Alliance Data's enhanced digital suite powered by Bread provides a fully white labeled, dynamically delivered, frictionless set of payment options. We enable brand partners to offer the right products to the right customer at the the right time across credit card, buy now pay later and installment offerings. In this demo, we'll see just how quickly Paul Smith can turn his deep passion for baking into a new stand mixer. Strategic placement highlighting Paul's recommended payment products unique to Paul's file and basket engage him early in his shopping journey. He sees that he could pay for his mixer with four interest free payments or that he could earn up to 6% cash back using a Nibella store card. Paul decides interest free payments are the best financial option for him and clicks to learn more. Paul is presented with an overview of the interest free payment terms and a link to explore the full suite of payment options available to him. For most consumers, The initial offer they engaged with is the right one for them. Paul clicks to get started with ByPayments, Alliance Data's split pay product. Since Paul is new to Alliance Data, he comes to our streamlined prequalification process. If Paul were already authenticated with Alliance Data, he would skip right to his customized offers. Billing information is pre populated either with data from the merchant or using Alliance Data's patented frictionless pre fill process. He validated his information, enters any final data needed, and proceeds immediately to his offers. Here, Paul sees the details of his biweekly payments offer offer and that his personal purchasing limit is up to a thousand dollars. He can also view the purchasing limits of other financing options he qualified for, which gives Paul optionality to upgrade or add on additional products. Paul adds his stand mixer to his cart and checks out. His prefilled data is pre populated on the merchant site for seamless checkout. He inputs his card details, accepts the terms and conditions, and completes his purchase. The entire process is quick, truly frictionless and fully integrated with the merchant's website. Our brand partners and Alliance Data's relationship with Paul doesn't end at checkout. As Paul completes repayment on any Alliance Data payment product, we robustly reengage him in email and in our self serve repayment experiences. As you see here, Paul is reminded in his confirmation email that he is able to claim the points from his previous purchase and get 20% off his next purchase if he graduates to our premium card product. As Perily showcased, integrating prominent and flexible marketing placements early in the customer shopping and purchasing journey is essential to drive customer awareness and conversion. We improved our brand partner experience by shortening the merchant integration to a few weeks. All the capabilities we shared today will be offered via Alliance Data Enhanced Digital Suite powered by the bread platform making it faster and easier for all of our brands to benefit from our latest technology offerings while providing consumers flexibility and breadth of choice to select the payment option that best meets their needs. Over the last year, we've witnessed an unprecedented as consumers made digital their channel of choice to stay connected, shop online, self-service and facilitate contactless payments. We directed resources to support our retail partner needs including as Deshaun highlighted in developing our enhanced digital suite, a digital shopping experience that increased awareness of payment options early in the purchase journey and gives consumers confidence in their buying power and removes friction in the process. The enhanced digital suite is a bundled offer of marketing and credit applications that create a seamless process for customers to adopt, apply for end user payment options. It includes dynamic real time offer messaging that brings credit to the forefront of the customer shopping journey. Messages that can be drawn off a variety of data elements including product, price, loyalty member status and redemption history to create personalization at scale and include secure application features that let customers apply for credit without leaving a brand partner's website. Enhanced Digital Suite was designed to provide brands with a fast, simple integration to get up and running and capitalize Single software development kit, EDS integration is fast, easy, secure and allows customers to immediately use their account with a digital shopping path. In placements have the look and feel of existing partner branding. Content is both compliant and customer friendly and as a result we have seen an increase in conversion and average order value. The acquisition of Bread was an efficient way to expand our product offerings and gain access to a broader audience and younger demographic. The FinTech platform advances our digital capabilities and offerings and the addition of Bread's highly skilled and innovative team brought in key talent in critical areas. We're also creating a new innovation hub in New York City to drive digital advancement throughout the organization. The bread payment technology platform is scalable, nimble and allows merchants in many cases to be live in a matter of days. There are more than 500 merchants on bread, a strong pipeline and we expect continued growth that is diversified across verticals. In 2021, we are investing more than $100,000,000 in expanding digital capabilities. We are also investing in technology flexibility and efficiency with the outsourcing of our core processing platform to Pfizer. The Pfizer core processing platform will allow us to improve partner conversions and speed to market including the ability to quickly and seamlessly add new products and capabilities to benefit our partners and card members. The platform enables efficient integration of digital technology while supporting our data and analytic capabilities and improving operational efficiency. The savings from these activities is redeployed to fund growth initiatives such as data and analytics including machine learning and artificial intelligence. We focus on data insights that drive actionable strategies that fuel revenue growth through increased trips and spend, increasing the lifetime value of the customer. Last year, we automated more than 30 manual processes the organization and continue to introduce intelligent automation to drive marketing and operational improvement. Alliance Data is now ranked in the top 5% nationally in terms of robotic process automation and bot usage. Unifying data and analytics, digital capabilities and alliance data and bread product offerings into a singular experience for our clients and customers creates a differentiated market Since closing on bread in December of last year, there has been a lot of interest from our brand partners in bread's products and capabilities. Split pay or buy now pay later is of interest to many of our soft line merchants in beauty, apparel and pet. While installment lending has been a topic of conversation with many of our big ticket merchants in home furnishings, jewelry and sporting goods. Bread offers a white label solution that matches our go to market approach with our brand partners. This means that the products have the look and feel of our partner brands which carries a lot of equity with their customers who have come to their site to shop. The white label solution is unique to bread and distinguishes the bread offering. In addition to being the only white label provider, we are also the only provider who is primarily focused on deeply integrating with merchants. This allows the customer to stay on the merchant site throughout the chain journey rather than being directed to a third party site. This is an important distinction. Many third party sites promote multiple merchant offers and their number one priority is having their app downloaded so they become the entry point of the shopping journey. This ultimately disintermediates the merchant. Our number one priority is sales conversion for our brand. The beauty of our expanded product suite is that our brands now have the ability to offer payment option to meet the needs of a wide variety of consumer segments and to do so in a coordinated, thoughtful approach that allows brands to manage the product mix as well as manage and optimize profitability. We will offer a unified application process across products using the bread platform. Our unified front end experience will enable Alliance Data to offer the widest payment product suite of any competitor in the space with products that serve the entire generational spectrum. If we only offered one product like many of the competition, we would miss 40% of our customers' preferred payment method. Younger demographics value buy now pay later with millennials two times as likely as Gen Xers and three times as likely as baby boomers to have used a buy now pay later service in the past two years. While buy now pay later is a product often sought by millennials, offering just a buy now pay later solution does not provide consumers the flexibility they crave. Consumers want the ability to spread their purchases across different payment options often based on the size of their basket. When surveyed, 35% of Gen Z and Millennials preferred a buy now pay later solution for a $100 purchase. But approximately 65% of them selected other payment types. By having a rich product mix, consumers can grow with a partner brand by graduating into more mature product offerings over time based on behavior and needs. Partnering with Alliance Data Bread for buy now pay later unlocks a graduation strategy and our analytics team can pull new cohort of shoppers, identify purchase patterns and enable targeted acquisition tactics for co brand and private label products deepening customer engagement with the brand. Unlike our competitors, we offer complete payment stack coverage meaning a single messaging strategy will be presented to consumers. We solve for the complexity of managing competing consumer propositions by offering a personalized, intelligent and optimized messaging solution targeted to convert and grow shoppers with our partner brand. To meet growing customer needs and expectations across the digital ecosystem, we are taking a customer centric approach to design new experience and capabilities that are modernized, intuitive and connected across channels. As our product offering has evolved, so have merchant and customer expectations on our ability to provide access to a variety of payment options in the channel of their choice whether applying for credit, purchasing or accessing rewards. We continue to invest in our digital capabilities making it easier for consumers to apply and seamlessly transact with their products across channels. Today, customers may start their shopping journey browsing on their tablet at home, then shop in store, feel the fabric, sit on the couch, then buy through mobile with a scan of a QR code to unlock incremental purchasing power. Cross channel transacting has accelerated and the use of buy online, pick up in store saw 18% of shoppers use the service compared to only 3% in 2019. As Deshaun touched on earlier, frictionless mobility provides a customer with the ability to scan a QR code with their mobile device, instantly apply and immediately receive a tokenized digital shopping pass that can be scanned at checkout. As part of this process, application fields are often pre populated using merchant or third party data sources, which reduces abandonment rate by as much as percent. And has a 30% average lift on first purchase. We have over 40 brands live with frictionless mobile today. And in first quarter, '2 million consumers leveraged our frictionless acquisition capabilities using tablets, QR codes and mobile devices to apply for financing. With our unified software development kit merchants have access to all products through a single integration and customers have access to a choice of financing options. As Perrily walked through in the demo, we use data ranging from data provided by the merchant on previous purchases, products and price points browse to determine one or more payment methods to highlight for the customer. Our ability to deliver the right payment product at the right time to each consumer optimizes customer conversion. There are almost 400,000 annual logins to our account servicing platform, representing over 80% of customer interactions. The last year has further accelerated demand for digital channels and seamless experiences and we are continuing to evolve our digital experiences to meet that demand. Card members rely on digital channels to self navigate their servicing experience, to find information and complete actions to manage their account. We are modernizing our digital properties by creating more intuitive connected experiences for customers to learn about their product, rewards and benefits. These engaging card member experiences will help customers unlock personalized content and offers, creating loyal customers and increasing lifetime value. Once an account has been established, we make it easy for customers to access their accounts wherever and whenever they choose. Our co branded proprietary card can be provisioned into all of the digital wallets and we have extended that capability to certain private label cards. Today, the Victoria's Secret private label card allows card members to make contactless mobile payments using Apple Pay, bolstering card member convenience and security. And we've seen an increase in digital wallet adoption with usage more than doubling year over year. We continue to progress in developing our digital capabilities to support top of wallet engagement, customer choice and an increasingly omnichannel ecosystem. This modernization provides our clients and customers with a flexible and scalable front end experience that works seamlessly with our back end modernization with Pfizer. A key reason we acquired Bred was the quality and versatility of Bred's leading payment technology platform. This platform can be deployed and leveraged in various ways and opens connections to new points of distribution to drive scalable growth and diversified value pool. Under the direct acquisition model, Bread continues to onboard digital partners at an impressive rate with approximately 100 additions in the last two quarters. Under this model, Bred receives merchant fees as well as earning interest on installment loans. Bred was an ideal partner to strengthen the expansion of our verticals and the addressable market of small to medium sized merchants while providing our existing partners with additional white label products. We are actively talking to existing brand partners to incorporate bread payment options into their suite of offerings. And in Q1, we launched our first Alliance Data client, Apartment 2B. Alliance Data is uniquely positioned to provide a branded full spectrum payment suite for our partner. We can now offer brands and new prospects a differentiated white label product offering across split pay, installment lending, private label and co brand. A few weeks ago, we announced the expansion of our business relationship with Pfizer through a new strategic relationship. This relationship is distinct and different from the outsourcing of our core processing which we announced with Pfizer last October. Under this new relationship, Pfizer will integrate BREDs payment platform to enable Pfizer's merchants to offer buy now, pay later and installment loans. The Pfizer relationship opens up an extensive distribution model for Bread, driving platform sales and receivable growth. The rapid growth and proliferation of buy now, pay later and installment lending solutions for e commerce has been unparalleled. While the online retail economy will undoubtedly continue to experience high growth, the in store retail channel remains substantial and still accounts for over 85% of total retail sales in The U. S. Many fintech providers offering buy now pay later installment loans have yet to crack the code in achieving success with their in store distribution of their payment methods. Through the Bred Pfizer relationship, we have several key advantages which will position us well for success. First, the partnership takes advantage of Pfizer's existing connectivity and integration with the merchant's POS in order to facilitate both online and in store new account acquisition and payments for buy now pay later and installment lending. By utilizing the merchant's existing process and toolset, The barrier to entry is significantly lowered and operational complexity greatly reduced. Additionally, taking the learnings and maturity from our Card Services business, the breadth team will work with Pfizer to develop best in class engagement and content distribution for the vast market of small and mid sized merchants within the ecosystem. Many of the smaller to mid sized merchants lack access to competitive investment lending today. So this new solution will open the door and provide them selling tools to drive sales conversion on bread payment products. We anticipate having our first merchant launch with Pfizer in the third quarter of twenty twenty one. Let me frame the relationship by giving an example. Picture a small mid sized consumer electronic retailer with 80% of sales occurring online and 20% in store. This retailer currently partners with Pfizer for merchant services in order to offer a wide range of payment acceptance solutions. With the new bread partnership, Pfizer can now offer the retailer incremental payment solutions to include buy now pay later and installment loans. Pfizer merchants will be able to offer these payment methods both in store and online delivering an omni channel customer experience and enabling more sales than ever. Merchants are trained on how to offer and promote the new payment programs and can simply download the marketing collateral, signage, QR codes, stickers in order to be able to promote the program. Bread will be fully integrated into Pfizer's merchant servicing dashboard where they can view and manage settlement, chargebacks and process returns across all tender types. This is a differentiated strategic relationship that goes beyond referrals to an integrated product offering that leverages sales distribution. We are also excited about our relationship with the Royal Bank of Canada. The Royal Bank of Canada is leveraging bread's digital payment platform to expand its payment solution offerings for Canadian merchants. As merchants are added to the platform, we earn a gateway and servicing fee per customer transaction. So the more the program scales, the more we earn to generating revenue without the credit risk. The Royal Bank of Canada is an ideal partner to expand our reach to Canada and build BREV's platform provider business. As Canada's largest bank, the potential to scale is exciting and we know that through this strategic alliance, we can help thousands of Royal Bank of Canada's merchant partners increase their e commerce sales and profit. Five years ago, we were predominantly focused on specialty retail and department stores with a strong DNA in soft goods as a result of our heritage. We provided private label programs that were highly integrated into the retailer's loyalty program offering consumers purchasing power and rewards. That market represented about $539,000,000,000 in sales. While we continue to embrace our retail heritage and private label, we have now expanded our verticals and product offerings, including co brand cards for general retail with a growing number of partners. We then acquired Bread and further expanded and diversified products and customer centric digital capabilities. Opening up e commerce lending nearly doubled our addressable market in the past year and this market is continuing to grow. With bread, we were able to unlock the online retail and travel universe, particularly the smaller e commerce direct to consumer brands that were out of reach with our classic product set. We've also seen strong engagement with our newly launched proprietary credit card. This general purpose cash back card has exceeded early expectations and we are seeing robust adoption especially among millennials. We now have a full suite of products to serve the total consumer spending marketplace. When paired with our strategic underwriting and growing number of diverse verticals, this expansion drives higher sales and market share. You can see the expansion of the company's total addressable market from a more single focused provider to where we are today at a $7,700,000,000,000 total addressable market. Over the last five years, our portfolio has evolved significantly. While we value our roots in specialty retail, we now have a more diversified portfolio that is not dependent on one vertical. In recent years, we've seen our beauty segment grow significantly with the addition of Ulta, Sephora, Sally Beauty and others. The plus size fashion segment has also flourished and we are excited to have recently signed a renewal with Torrid. Our brand partners have also expanded over time to meet their customers' needs by providing a more omni channel experience and leveraging our in store and digital products and capabilities. In recent months, we have seen consumer confidence start to improve and in store shopping has picked back up, yet our online sales remain at over 40%. As we roll out our bread platform, we expect online sales to grow even as traditional channels ramp up. Next, I will share how we bring value to our partners and customers. First though, let's hear from a few of our partners directly. Ulta Beauty has been working with the team at Alliance Data for five years to help deliver on our omnichannel strategy, attracting and engaging guests with new offerings, new programs and new experiences. Together, we've developed the Ulta Beauty Mastercard and our first ever private label card, the Ultimate Rewards Credit Card, which celebrates our loyalty program members. Today, we have well over 4,000,000 cardholders and they are some of our most loyal and most valuable guests. Our dedicated Alliance Data team acts as an extension of our team, really thinking about our guests' needs and bringing forward the strategic resources and broader thinking with a true marketing lens. It was really critical that we offer private label and co branded credit card options to reach the broadest number of Ulta Beauty guests. Importantly, we wanted both options to carry the same value proposition. Alliance Data's proprietary algorithm helps select the right card for our guests to really maximize the long term engagement without compromising the in store or online experiences as they apply for the card. Together, we really stay on the pulse of cardholder spending trends and leverage data to remain as strategic and as flexible as possible to be able to fuel our growth and to delight our guests. And at the end of the day, our partnership with Alliance Data has unlocked many possibilities and we're proud to call them partners. Through our Signet banner credit card programs, we provide a robust PLCC program across banners with a wide promotional plan offering to support our customers' unique needs and preferences. We use Alliance Data's integrated application process. Customers can apply in store, online or through their mobile device, and it creates an application experience that is quick, simple and allows for real time access to financing upon approval. Alliance Data has been in lockstep with Signet as we focus on digital growth. We have introduced dynamic credit messaging that drives financing option awareness earlier in the shopping experience, resulting in better conversion. Providing the right customer experience is really important to us, and Alliance Data has been instrumental in bringing data insights to help us reach our customer wherever they are in their shopping journey. This includes the creation of predictive shopping models that help us grow our existing customer base by identifying new customers we can welcome to Signet. Alliance Data is an important partner extension of our team, bringing value to our brands and our customers. We value our partnership and all that we have been able to achieve together. We are proud to grow our business relationship with Alliance Data. In addition to providing world class credit card processing services for Alliance Data, Fiserv will enable our merchant clients to leverage Bred's turnkey point of sale lending technology. Our expanded relationship will allow Fiserv to offer point of sale lending solutions such as installment payments and buy now, pay later options to our merchant acquiring clients, which in turn enabled these businesses to provide their customers with flexible payment options when shopping in store and online. We made a strategic decision to partner with Bread for a number of reasons. First, Bread's innovative point of sale financing solutions will facilitate merchant transactions of any size, giving our merchants and their customers more flexible payment choices. Second, the bread solutions offer an API driven, modern customer experience for consumers across the full credit spectrum. And it helps our clients. By enabling pay over time financing solutions, Bread can help merchants drive more sales, reduce friction, and boost conversion rates by engaging shoppers throughout the sales funnel. Our partnership with Alliance Data and Bread enables us to provide even greater value and service to our clients and their customers. Well, we chose Bred. I mean, you know, we were looking for a provider for point of sale financing. We wanted somebody that, you know, is flexible and could adapt and grow with us. Bred's suite of products was fantastic. They came highly recommended. You know, it really felt right. The technology is right. The team we're working with felt right. And we've been fortunate. It's been a great partnership, and we're doing some amazing things. As we were talking with Brad about the solution we wanted to bring to market and the things we wanted to build with them, we already had a number of very, very large partners that needed this capability. And so initially, it was very turnkey. Now as we go out to our merchants where we provide lots of different services, we help them grow their sales through our offers engines. But now we have a capability that we can kind of easily deploy via BREDS technology to those merchants to help them kind of grow their sales through point of sale financing. And we've just had really, really good response from the merchants we've talked to. So it's been a huge boost. And from a consumer perspective, obviously, of sale financing is growing dramatically. And so now we also have a solution that we can put in front of our own customers for their purchases. We're so appreciative to have such strong partnerships with the brands we serve. As you saw through our partners' lens, we bring value in several ways, including relevant product experience, rewards and loyalty capabilities, technology and data and analytics. We have a long history of working closely with the brands we serve and are focused on creating sustainable relationships where we increase value for both parties. We are dedicated to providing solutions that drive loyalty, whether that be through credit reward programs, promotional financing or payment flexibility that is branded and part of the shopping experience. Bread's quality and versatile lending payment technology platform, in combination with our enhanced digital suite, further expands the value we provide to our brand partners. Our full product suite allows brands to manage their payment product mix to drive incremental sales and optimize profitability. Data and analytics is also a key area of differentiation we bring to our brand partners. Our brand partners can use self-service reporting solutions available through Alliance Data's Partner Analytics portal. This provides near real time access to comprehensive brand acquisition and sales data as well as underlying driver analysis providing immediate insight into what is stimulating performance. These tools help our partners to understand changing behaviors and emerging preferences of their customers, to analyze customer performance by demography, geography, tenure, channel, trip and basket size and to develop and support their internal planning and forecasting capabilities. In addition to data access, Alliance Data supports our brand partners by providing dedicated analytic support. Our award winning data scientists and analytic professionals are embedded within our brand management team. And for a selection of brand partners, Alliance Data Associates even serve as the primary on-site data science resource for our brand. Because of this tight integration with our brand partners, Alliance Data is able to understand and anticipate our partners' needs and proactively deliver unified solutions supporting their goals and strategic objectives. Recent developments on this front include: one, a strategic customer acquisition tool built on a custom artificial intelligence engine leveraging over 900 data points on 180,000,000 individual U. S. Households to identify and predict those most likely to respond to partner membership opportunities and two, a digital product recommendation engine incorporating customer shopping history and digital footprint to create and deliver individually tailored marketing content. The product recommendation engine drove two time response rates to email and digital marketing campaigns. This approach to leveraging data and analytics in support of targeted acquisition and sustainable business growth creates a differentiated set of outcomes for us and the partners we support. To meet growing customer needs and expectations across the digital ecosystem, we are taking a customer centric approach to design new experience and capabilities that are modernized, intuitive and connected across channels. With our robust product suite and integrated software development kit, we've provided unparalleled customer choice and we've enabled that choice with seamless application experiences through mobile, digital and in store utilizing intuitive design and pre fill to increase conversion rates, reduce abandonment rates and drive sales and loyalty. We have armed our brand partners with access to marketing and product placements that drive consumer awareness of payment choice and purchasing power early in the shopping journey through our enhanced digital suite. Data is a critical element here. By having the full product suite and the supporting capabilities, we offer the right product to the right customer at the relevant time and we have deployed machine learning and artificial intelligence and data and analytics to drive insights and personalization from application to engagement to servicing. We put control in the hands of our customers to engage with us in the channel of their choice. And in 2020, over 16,000,000 customers used a digital device to access their account online, including reward and benefit information and we are continuing to evolve our customer journey. We have invested in the products, capabilities and data and analytics and when paired with our strategic underwriting, which Tammy will cover in more detail, drives higher sales and market share. It feels like we covered a lot because there's been a tremendous amount of work completed over the last year. Welcome, Val. Thanks, Brian. All right. So as you'd expect, we have a lot of questions coming in from investors on bread. So we'll jump into the first one. What more can you share on the economics of bread? And can you help us size the opportunity with the three different bread models? Sure. So we'll continue to run bread as part of our card services segment, which provides for efficiencies as well as some exciting cross sell opportunities. The bread will be embedded as part of our overall product suite. So we won't be breaking bread out and reporting separately from a P and L perspective. We do expect to have some great growth across the platform from the Royal Bank of Canada, Pfizer as well as our direct merchant relationships. So feel very confident in our ability to more than double BREDs receivables by the end of the year. Although we've not provided targets by channel, we do expect to have significant contribution from all three models. So our direct model where we will acquire receivables and earn interest in merchant fees, our distribution model with Pfizer where we will also generate receivables and earn merchant fees and finance charges and our technology platform with the Royal Bank of Canada where there are no receivables and no credit risk and we earn a gateway and servicing fee. The future mix and growth will largely depend upon our partners prioritization roadmap But we believe that we will lean a little heavily into the direct model given the large number of bread merchants already up on the platform, the robust pipeline that we have and our ability to cross sell into our existing 130 card program partners. When we acquired bread and opened up the e commerce lending opportunity, we almost doubled our total addressable market and this market continues to grow. Great. Thank you. Next question. What does your rollout plan look like for bread? How many card partners can you expect to see added in the second quarter and second half of this year? And when can you expect one of your larger partners to be run on the bread platform? Yes. So bread continues to onboard their digital partners at an impressive rate and continues to increase their pipeline of prospective digital clients. With Pfizer, we also have an opportunity to further penetrate the small and mid sized market where our traditional product was less relevant. We've been talking to our existing card program partners who have been excited to add bread into their product suite and provide a more robust consumer choice. We launched Apartment 1B in Q1. We'll have additional clients come on board in Q2 and further ramp that up in Q3 and have one of our larger partners up by the end of the year. Great. Thank you. One more question. What does your new business pipeline look like? And then are there any large portfolios you are hoping to acquire? Yes. So we're constantly evaluating opportunities in the market and look forward to growing our portfolio and doing so in a way that achieves sustainable profitable growth. Last year, because of the pandemic, saw opportunities lighten up. That started to pick up in Q4, and we've seen that further accelerate in 2021. We've also seen prospective clients look for more robust payment offerings across multiple products in omnichannel. We launched Famous Footwear and Petco this year across all of their digital properties as well as in store and expect to have further announcements in Q2. Great. Well, thank you very much, Val. With that, we will take a ten minute break. I'd like to welcome Tammy McConaughey, Executive Vice President of Card Operations and Credit Risk, who will provide insights into our lending philosophy and credit outlook. Tammy has been at Alliance Data for nearly thirty years and has experience in a variety of roles throughout the organization. Tammy, have to tell you, it's been an absolute honor to work with you over this past year. Thanks, Ralph. And I'm excited to be here today to talk about one of the key enablers of our growth strategy. Ralph talked earlier about how we are now at twenty years as a public company. Our history though stretches back even further and has a strong retail heritage at its roots. That retail DNA has been a key driver to how we approach credit risk management here at Alliance Data. Retail is all about the consumer and ensuring that we can meet their needs in the moment. When you think about the full spectrum of retail and the new products that both Ralph and Val talked about, ensuring that we can meet those needs in terms of lending approval in the moment, dynamic line assignment, instant line adjustment to accommodate larger purchases requires agility, flexibility and speed to ensure a friction free experience. Today, those requirements still hold. If anything, they're amplified as we all embrace an increasingly digital and mobile centric buying model. To stay ahead of consumer needs, you need flexible technology to manage the broad range of products, consumer profiles and purchasing needs. In addition, since retail has not been predominantly about interacting face to face for a while and we want to responsibly meet the consumers' buying needs, we have the ability to bring in multiple scores designed to manage underwriting, identity and brand data that is critical for full spectrum success. Speaking of full spectrum, we are excited about the new products like buy now pay later to help further differentiate our grow and expand approach. We believe that every consumer deserves the opportunity to establish credit. Our approach is to grant credit lines that are manageable, provide consumers the ability to manage their payments and spending power and then gradually grow their lines with good payment behavior. Our data indicates that approximately two thirds of lower scoring cardholders significantly improve their bureau risk scores in first twenty four months after opening an account with us. This also builds loyalty to the brand and Alliance Data. All of this comes with our well established risk appetite metrics. The metrics provide an important foundation for all of our decisions. Not surprisingly, our metrics are focused on credit risk and profitability since we see our accountability to make profitable risk decisions and not just focus on a targeted loss or delinquency rate. This balanced approach is why we really see our mantra as being about profitable, fair and responsible lending. How consumers spend and engage is ever evolving and the world of underwriting has to stay ahead of that demand. Highlighted here are just a few of the key investments we have made over the last twelve to twenty four months that allow us to provide leading approval rates within our risk appetite metrics. Upgrading to VantageScore four point zero, while FICO has been a well recognized name in credit scoring, we have always been more partial to the Tri Bureau Vantage score. We leveraged their latest version four point zero currently and use Vantage for its proven ability to score more applicants, very important to our brands and its enhanced ability to better segment good and bad performance especially below prime. So not only can we score and approve more applicants, we also have seen higher profitability since more of the good accounts get approved. In short, a superior score from our perspective which is why we have used Vantage for well over a decade. It does scale similar to FICO and a score of six sixty remains the general industry standard for Prime. We have also invested heavily in upgrading our core platforms. Predictive modeling has come a long way as technology has enabled artificial intelligence and underwriting has been a key focus area for deployment. Machine learning models, more sophisticated strategies that involve multiple model overlays as well as introducing dynamic variables are critical for finding the best approval rates and strong profitability. We are also long time proponents of alternative data sources beyond the credit bureaus to manage the broad spectrum of brands and consumers that we serve today. We are constantly developing or testing commercially available scores with an emphasis on really three areas. One, protecting our consumers. Leveraging tools, data and models to refine identity theft prevention and malicious intent or synthetic identity detection and deflection. These are critical for protecting consumers especially in the higher end of credit scores due to the continued movement to digital acquisition. Two, enhance our future state solution for the broad spectrum of consumers with younger consumers likely to be on or under banked alternative data sources to identify responsible payment behaviors are key to helping these consumers establish credit and ensure they can build their credit history over time. Three, deliver strong approval rates with the right credit lines by strengthening traditional credit scores with alternative data overlays as well as custom bureau overlays to optimize in across all score segments. We are consistently searching for the best scores and tools to enhance credit management, but also support our brand partners. The acquisition of Bread has strengthened our underwriting tools and talent. We have one team dedicated to researching tools and scores and another dedicated to consistently challenging our internal models. Our emphasis on full spectrum lending is not only critical as a differentiator for Alliance Data with our partners, it is also important for driving strong profitability. The figures on the bell curve represent the risk adjusted return for the different score bands as compared to the return we receive in the super prime space. As the chart shows, we are very comfortable and optimized in the area around prime which falls into the range of 600 to seven forty. Accounts in these segments have over two times the return of an average super prime account. We also generate a good risk adjusted return in the subprime segment due to the advanced algorithms, data and tools we use to selectively approve customers that are relatively good risk within those four segments. As a result, while the segment has a lower approval rate, these customers are highly incremental to our brand partners as we provide purchasing power through our grow and expand approach that provides very manageable credit lines. Super Prime is less about credit risk and more about identity protection for our consumer and remains an important segment in terms of purchasing power and we find that these customers are largely transactors or those seeking financing of large purchases. Our commitment is to be more transparent and this includes sharing our risk score distribution quarterly moving forward. What is reflected on this slide is our VantageScore risk distribution at the end of first quarter for 2021 and 2020. What this reflects is a shift in our risk distribution driven by our deliberate actions in 2019 supported by our enhanced scores and tools. Our focus has been more about optimizing our less than 600 segment ensuring that the segment remains profitable and responsible. Our above six sixty mix is growing and it's important to highlight that our strongest growth is coming from Prime and Prime Plus, also our most profitable segment. Near prime is also highly profitable and this is the segment where our grow and expand approach is critical. We recognize that our risk mix is different than our competition and that is deliberate. It represents who we support reflects the benefit of our innovative underwriting, product mix and fair and responsible lending. Given our credit risk mix, you can expect a steady loss rates while maintaining leading approval rates within a diversified product mix driving profitable growth. I've shared our underwriting philosophy, our focus on continuous innovation and a well balanced risk appetite that allows us to provide leading approval rates to our brand partners and customers. When you then pull that together with the terrific progress and plans Ralph and Bao shared on expanding our products and markets, you see how this all comes together in harmony. Providing full spectrum lending and underwriting with an expanded product mix ensures that no matter the product or consumers our brands are targeting, we can meet their needs and help them grow. That same innovative underwriting approach coupled with our commitment to ensure we provide manageable lines and protect consumer identity gives consumers across the credit risk spectrum an opportunity to better budget, finance and earn rewards. Ultimately from a credit risk perspective, it best enables our mission to deliver steady losses and sustained profitable growth to our shareholders. Hi Brian. Welcome Tammy. Thank you. All right, let's jump into your questions. Okay, great. First question, thank you for the VantageScore distribution data. We are curious as to what your target average VantageScore is? So Brian, as I shared, we are really focused on making profitable responsible decisions within our risk appetite metric. Therefore, we don't really target an average vantage score. However, we are focused on optimizing the approval rate for our brand partners and their customers. We are however always focused on continuing to strengthen those scores, algorithms and models that we leverage. Again, we don't focus on a specific vantage score, we're really focused on making profitable decisions. Do you have any plans to underwrite deeper in the future? Good question. So we certainly have normalized our strategy as we have started to come out of this pandemic. We've been very cautious with doing so. I did share that we do already underwrite below 600 very selectively And we leverage a lot of those scores and algorithms and models that I shared with you to really make responsible decisions in that below prime segment. So I don't foresee us going any deeper. What I do foresee is continuing to strengthen our scores and our models that we're leveraging and continuing to find ways to strengthen the profitability within that segment. Thank you. How do your April credit metrics impact your outlook for the second quarter and full year on losses? Well, we are certainly very pleased with our losses year to date and our delinquency levels. And April was another very strong month for us. The April loss rate at a 5.2% really gives us confidence in our guidance for the second quarter, really focused on achieving really the lower part of that range that we gave for the guidance for the second quarter. So we believe we'll be in the mid-five percent range. And then as you think about the delinquency, it was another low point for us at 3.4% for the month. And so certainly that gives us even more confidence in our full year guidance for the year coming in below 6%. Great. Last question. Do you anticipate that your risk mix will change given the strong growth expectations from bread? So I know I believe I've shared, know, the bread risk mix is very strong, relatively 85%, or greater than six sixty. What I believe really this this, leads us to is an ability to open up the buy box for bread. We can leverage both their tools and technology, also our data elements and our scores as well to continue to expand the buy box for bread. So I don't foresee that as bread grows that it will fundamentally or significantly shift our overall credit risk mix. Great. Well, thank you very much. With that, I'll now turn it back over to Ralph. Last, but certainly not least, I'd like to speak to our financials. Working with the board and my leadership team, we have set the following long term financial targets for Alliance Data. These targets were set with a planned LoyaltyOne spin off and represent our targets for the remaining company. As I mentioned, we see a path to high single digit annual receivables growth over the long term and expect to exceed this in 2022. This trajectory positions Alliance Data to exceed $20,000,000,000 of receivables in 2023. The receivables growth combined with our outlook for stable yields suggest a similar revenue trajectory going forward. We are targeting positive operating leverage in 2022 and beyond, driving improvement in our pretax, pre provision net revenue run rate. We are focused on strong year over year underlying earnings growth. Importantly, our projection includes a high level of investments in digital technology and the projects as we are committed to continue to invest in our drivers of growth. As Tammy pointed out, our business mix and underwriting strategic advantage continues to drive lower projected losses. We would expect our average through the cycle net loss rate to be better than our historic level of 6%. Underwriting philosophy is designed to drive higher risk adjusted returns and balance sheet growth. As a result of these items, we are targeting an ROE level in the mid to high 20% range. This level will allow for continued balance sheet growth as well as continued proactive investments each year. Putting this all together results in a very compelling outcome, driving both sustainable growth and strong returns. As you have heard, we are confident in our growth opportunities. Sales are reaching an inflection point that will start to drive receivables growth going forward. We expect our revenue yield to remain steady, no change in the prime rate. We are seeing the revenue yield for bread coming above the portfolio yield and anticipate further yield accretion as the Royal Bank of Canada relationship ramps up. We are also watching out for pricing compression in the buy now pay later space. We have not yet seen that pressure materialize. Finally, we remain focused on maintaining prudent expense management. We have proven over the past two years that we can become more efficient while continuing to invest strategically in our business. Many of the investments we have made including machine learning, bots and fraud tools help to lower our cost to serve. Our focused effort to drive positive operating leverage will allow more revenue to fall to the bottom line. Our typical growth in receivables is driven by three key factors. First, increasing sales growth from our existing retailers, which is loosely aligned to GDP growth. We expect these sales to provide a 2% to 3% lift in our receivables. Second, introducing new products and services to increase our tender share at existing retailers, accounting for an additional 2% to 3% growth. And third, new brand partner acquisitions and the ramp up of new vintages, which would offset attrition leading to an additional 2% to 3% growth. We would expect a combination of these three factors to lead to high single digit organic growth each year. Additionally, we are forecasting incremental growth from the execution of the new bread platform relationships as well as the potential for portfolio acquisitions. We anticipate additional tailwinds in 2022 from pent up customer demand and payment rates stabilizing at more historic levels. We believe these drivers of growth will increase receivables in the high single to low double digit range for 2022 and potentially beyond. Next, we will quickly review our mix and funding costs. In 02/2019, we introduced our Comenity Direct business, which has grown our retail deposits to approximately $2,000,000,000. This new funding source has helped to lower our funding cost and is expected to continue to do so as we grow the program in the future. We expect to continue to grow our retail deposits and anticipate that almost half of our funding will come from the consumer channel in the future. We expect this will lead to a lower cost funds relative to interest rates over the next few years while maintaining a diversified funding mix. Our capital priorities have not changed. We have prioritized funding organic and investing in capabilities like those that bread brought us in 2020. We expect to maintain shareholder dividends at the current level and are focused on improving our enterprise capital metrics to be more in line with peers. The primary way we'll achieve this is through paying down debt. The planned spin off of the LoyaltyOne segment will contribute to moving us to parity with peers. Finally, once we are comfortable with the level of enterprise capital metrics, we will ask the board to consider additional capital returns to shareholders in the form of stock purchases or increased dividends. We will provide more guidance on our targeted levels as we move closer to our goal. When I joined the company over a year ago, the board and the leadership team saw an opportunity to improve our company to better compete and serve our partners and card members. We have made great strides, but we are not taking our foot off the gas. We will continue to make investments in key areas, including technology innovation, product development, and digital advancement. We continuously strive to become more efficient while improving our offerings, capabilities, user experience, and data and analytics. We will leverage our bread team to drive digital innovation that appeals to consumers and lean on our engineers to continue to create the digital offerings of the future. We will harness the power of our data to reduce the cost to serve, drive partner sales, and provide consumers with the product most likely to engage. Our strategic initiatives are built on the solid core of our company. The key foundational elements include proactive risk management, prudent balance sheet management, which aligns with our capital priorities, and disciplined expense management, will drive positive operating leverage and allow for self funding of continued investments. We would like you to leave with a few key takeaways. First, we expect exponential growth with the addition of bread and anticipate bread to approach $10,000,000,000 in platform sales in 2023. We have the right people, products, and technology, and are laser focused on execution. Second, our diversified products and robust underwriting increase our total addressable market and improve sales for partners by helping them build their brand. Third, we will continue to innovate to meet our customer and partner needs. You will continue to hear us talk about evolving with the consumer and their changing preferences, providing them with choice on how and when they pay, and enhancing the shopping and payment experience, especially through digital technology. As I said before, we will have the discipline of a public company and the curiosity and the heart of fintech. We are redefining who we are as a company and how we will compete. We have a committed leadership team and dedicated employees, all of whom are working together to drive a successful transformation. With this comes opportunity and excitement for the future. The combination of the changes we have made and our direction for the future sets up Alliance Data to provide long term value to shareholders through sustainable, profitable growth for years to come. We will now open it up for questions. Your first question comes from the line of Sanjay Sarekhan from KBW. Your line is open. Thank you. Good morning and thanks for all the info. Ralph, I appreciate all the color on the financial targets. I'm hoping you can help us think through the associated revenue growth relative to the loan growth expectations you've discussed. Maybe you could speak to the bread volume and sort of the take rate there. And I know you talked about efficiency gains and maybe you could talk about what this means in terms of EPS growth, assuming you get some operating leverage as well. Thanks. Hey Sanjay, well thanks for joining us first of all. So in terms of revenue growth, I think it's going be commensurate with that single high single low double digit growth. I think you'll see that consistency there as well in terms of revenue growth. In terms of take rate for bread, I think it's going to be really important that the take rate continue to go up. And I think we've got the best product and with really good pricing, we're going to see take rates increase over time. So I'm really excited about that. After 2021, positive operating leverage is going to be where we are and you should see again that commensurate growth rate in the EPS. I can't give an exact growth rate in EPS, but given positive operating leverage, high single to low double digit growth in revenue and receivables, good take rate on bread and continue us us continuing to introduce new products, I think you'll see a nice rise in our EPS. Okay. Just one follow-up on strategy, perhaps for Val as well. You guys obviously worked at larger private label issuers. I definitely see the synergy between buy now pay later plus private label altogether. And clearly, you're ahead of your peers. It sounds like some of them are coming around to embracing the strategy as well. How do you think that positions you in terms of customer acquisition or retention? And how long do you think it takes the others to catch up? Thanks. Yes. Well, I'll start and I'll throw it over to Val. So I'm really excited to be out in front. It's a position to be in, so I'm really excited about that. And if you think about products, it really is a basket of products rather than one offs. And we can get bundled pricing and I think that's really interesting for our partners. And right now we're signing new partners, we're renewing new partners. So I feel that our competitive advantage will run through the cycle as these things happen. With that, I'll ask Val to kind of jump in. Sure. Thanks, Ralph. So our current partners have responded pretty positively to that very robust product suite that we've now brought into the market. So if you only offer one product, you're not providing the consumer choice that they're looking for to really use the payment solution that's most relevant to them at that point in time. So we have seen a very good interest from our current clients on expanding that product suite via the buy now pay later installment co brand or private label. And in our current prospective merchants that we've been talking to, they more and more are looking for that very multi product, robust offering to address a multi generational customer that's coming to their shopping. So we do see some distinct advantages to strategy that we're deploying. Mean, certainly to finish off, we're a one stop shop for patients. I think that's a really good place to be right now. I appreciate it. Thank you. Your next question comes from the line of Robert Napoli from William Blair. Your line is open. Thank you for the question. Very good presentation. Really appreciate all the information. Question on the BRED volume, I think Ralph, you suggested that BRED volume would be I think $10,000,000,000 exiting I think 2022 or 2023. And maybe a little what does that translate into loans that would be held on the balance sheet and to revenue? Is there a hybrid model here of selling some bread loans and holding some on the balance sheet, but any color on what that $10,000,000,000 means to revenue loans on the balance sheet? Hey Bob, first of all, again, for joining. Just to be clear, that was 2023 and I was approaching 10,000,000,000 And our view is we keep the loans on our balance sheet. And as Val explained earlier, there's really three revenue streams for bread. One is direct to consumer, the other one is distribution and the third one is a tech platform. Obviously, the tech platform doesn't drive receivables, but the other two do. And our view would be approaching that $10,000,000,000 in 2023. Val, anything to add? Yes, exactly. I would say, in addition, that mix between those three is ultimately really going to determine where the receivables land. And also recognizing we offer both buy now pay later and installment and so the tenure on those products is also very different. And the receivable growth in Bred is part of the guidance we provided. Okay. And then I guess maybe on the tech platform, you've talked about RBC quite a bit. Is there a pipeline beyond that? And is the tech platform going to be do you feel like it's going to be a material part of that $10,000,000,000 Yes. So there's a pipeline at RBC for sure. So they have a pipeline of merchants that we will put on the platform and we are actively looking at other opportunities for that platform as well. Val, anything else to add? Yes. One of the reasons that we acquired Bread was the fact that their platform is so scalable and nimble. And so RBC has been a great partner, a lot of opportunity for growth and we'll continue to look at opportunities to scale that platform. Great. Thank you. Thank you, Bob. Your next question comes from the line of Jeff Adelson from Morgan Stanley. Your line is open. Hey, everyone. I'm just also want to voice my thanks for all the added closure. I know everyone's been asking for that and I think investors would really appreciate that. Just wanted to dig in again on BRED. What do you think the size of BRED can be in three to five years in terms of receivables? I know it's been asked, but just trying to understand what the potential upside there is to the loan growth. And is that all completely incremental to the kind of $20,000,000,000 of balances you're highlighting? I know you've already discussed this kind of more than doubling this year, but just wanted to kind of understand how that all factors in? Yes. So I'm glad you said doubling this year because that was going be my lead line. We're going to certainly double the bread receivables this year. And then you can see that growth high single, low double digits as we predicted our growth going forward. And yes, there is upside in our projections for bread as we move forward. I'm going to toss it over to Val one more time and see what else she has to say. Great. Thanks, Rob. Yes, I would just say, we're pretty excited about all of our new relationships with Brett and Pfizer in particular really allows us to scale in that small and mid merchant segment that our traditional products didn't place. So some good opportunity for scaling there. Okay, great. Thank you. And then how additive can RBC be to your gross yield upside? It seems like perhaps you might be guiding us to flattish yields from here, but just wondering how you're thinking about the range of expectations with RBC on the gross yield? Yes. So our yields are going to be steady as we look out through 2021. I think the bread yields are a bit better or a little accretive to our overall yield. And RBC in particular, if you think about RBC, we get a continuous fee. It's not a one time fee, it's a continuous fee by transaction and no receivables. So it's a nice revenue stream that adds to our yield. So we see that as accretive to our yields going forward. But our yields was up a bit in the first quarter and we expect our yields to be steady for the balance of this year going into next. And then if I could just maybe slip one in on strategy. Have you ever kind of done an analysis on how hard it is to go to market with a kind of multi point, multi price point, multi product offering from an underwriting perspective on on BNPL versus maybe more of a simplistic offering that I think some of the competitors are out there offering with with just a very simple paying for product? Yeah. You know, it's interesting. But I think that we're able to segment the data and analytics. We're able to segment and really offer people what they deserve in the marketplace rather than a one size fits all. We're able to be very specific about what we can offer and how we underwrite people. So I think that's a really good strategy for us to get a lot of good take rate on that because people are engaged with pricing. I'm going ask Tammy to kind of jump Yes, Thanks, Ralph. So I would add to that just to say that certainly as we bring our two organizations together, we've really continued to strengthen our underwriting and our tools and technology. To your point, we'll leverage those different data elements to make the best decisions in regards to the products that we're underwriting for our brands. Okay, great. Thanks guys. Your next question comes from the line of Mihir Bhakti from Bank of America. Your line is open. Hi, thank you for taking my questions. And firstly, let me also echo Ralph, my thanks for the session today and really to the whole team, I think very informative and fairly something investors have been asking about. Maybe I could just start with bread a little bit. I guess the first question I had on it was just in terms of the opportunity on I think I heard you say there's opportunity on take rates. Can you just clarify that a little bit? Is that just the RBC fees layering in or are there like opportunities on the core take rates that like on the MDR, I guess that you charge to merchants there? Yes, I think there is. We are our pricing is going to be very competitive because we price overall for a partner. It's not pricing for a specific transaction, we price overall. So we can give them a basket of prices. So we think the take rate is going to be very attractive for the consumer for buy now, pay later, even installment loan. It will be extremely competitive. Val, anything to add? Yes. No, I think that's right. We have an opportunity to price very robustly across the products and we do so and we offer a very competitive product that creates incremental value. We're the only buy now pay later that does the white label solution is also fully integrated at the point of sale, which reduces friction and creates incremental value for both parties. Understood. Thank you. And then just in terms of I don't know you're not disclosing Bred Financial separately, but maybe you can at least help us with just stack rank or just give us a way of thinking about what the returns on a Bred loan. Are they comparable to the core private label business? Is it privately like if you had to choose one if you could only do one of the two, which like which has like more interesting or more interesting returns? Well, I'm not Meryl Streep, but it's not Sophie's choice. I like having a robust set of products in my view. I think bread will be accretive to us. That's why we spent the time and energy to acquire bread during a pandemic because we knew it would be accretive. It closes product gaps. It focuses on millennials. It gives us a larger addressable market. All of those are accretive to our franchise. So it's a good complement to our traditional products and really gives the consumer choice and gives our partners the ability to offer the right product at the right time to the consumer within their buy flow. So to me, I don't want to choose one or the other. I like them all, and I like the fact that we're integrated. Okay. And then just one last question just on the enhanced digital suite. The solution you demoed today certainly looks very customer friendly and interesting. And I guess the question is when will we see that more widely across your retailer base? Can you just update us on the timing on that just as your retail merchants start integrating that? Thank you. Yes. So let me start and then I'll turn it over to Val. It's really built to integrate quickly. It's built in on a series of APIs and the key is getting into our customers' schedule of technology implementations. That's the real key. Once we're there, it's really easy to integrate in a short period of time. But I'll let Val talk a little bit about our schedule. Sure. Great, Ralph. So we are starting to integrate more broadly across our merchant base, the enhanced digital suite. We brought up both Famous Footwear and Petco on enhanced digital suite. So we generate awareness around those payment options very early in the shopping journey and remove that friction through the transaction. We also have more than 40 merchants up on frictionless mobile where they can scan on the QR code and immediately you'll get approved and transact and check out all on mobile. Great. Thanks. And my last question just on credit and then I'll get off. It's just, Tammy, the statistics you all shared clearly there was a lot of improvement in 2021 over the last year, guess, right? But the question I would have is how much of that was driven by just the pandemic and you're tightening credit? And what should we expect just in terms of what those metrics look like? I understand your guidance overall is a little bit below 6%, but just what are those metrics from a VantageScot perspective look like as we go out like a year or two, should we expect similar or should they normalize I guess back a little bit? Thank Yes. So certainly, I would say that a smaller portion portion of our improvement in the credit risk mix was driven by the pandemic. But more importantly, it was driven by the changes that we implemented in 2019 and really around those enhancements that I spoke to. So improvements in our score, improvement in our models, the ability to bring in more data elements really continue to strengthen our risk score distribution. So while there may be a slight normalization in some of the risk mix distribution, I do expect it will continue to be strong. And so again, I don't believe it was primarily the pandemic, really was the decisions that we made at the end of really throughout 2019 to continue to enhance our scores. Thank you. Your next question comes from the line of Vincent Caintic from Stephens. Your line is open. Hey, thanks very much for taking my questions. First question, so I love the detail about the positive operating leverage. I was wondering if you could talk maybe a little bit about the components of that when you think about top line growth growth versus expense efficiency. So you're doing a lot of core processing spending there. And maybe so maybe if you could talk about how you drive operating leverage versus other factors? Thanks. Sure. So starts with growth, right? So we're anticipating high single digit revenue growth in 2022. Want be clear, processing operating level occur in 2022. And all of the things we're doing around digital are they're customer facing end to end. So we're also driving down our cost to serve. We think that's critically important. So when we reduce our expenses in terms of cost to serve, revenue growth at high single digits and our ability to flex our expenses and our investments as we move forward, that we can manage operating leverage with those combinations. We'll continue to invest as long as the revenue is there. We'll continue to invest in capabilities and products. But that's we have control over that. We can moderate that with as we think about investments going forward. So positive operating leverage in 2022, we're confident about that. And the combination of that revenue trajectory, managing our cost of service through digital and other innovation and then managing our investments based on that revenue growth. So we feel that's how we'll achieve our positive operating leverage. Okay, great. Thank you. And then, so quantified a number of growth drivers to get to the high single digit year over year receivables growth, I guess kind of related to existing capabilities. So maybe another great question, but kind of tying it all together, think you gave us bits and pieces of it with some of the volume metrics. But when you think about bread as an overall contributor to that high single digits, could you maybe help us break it out there or how incremental it could be to your receivables growth? Yes. We're going to manage, Brett, as part of the Card Services segment. Call it the payments payment services for as we move forward. And the way I see, Brett, is it just increases our penetration in our current product in our current portfolio, right? So where people might have opted to do something differently, now we have a product where we can go deeper with them and give them choice in our existing partner base. Secondly, bread on its own in terms of acquiring small to midsize partners, I think that's critically important. Those are, you know, that'll drive incremental benefit for us. And then as we mentioned, the RBC relationship on others like to drive incremental revenue. So bread will be a as we move forward, it won't be the only growing part of our portfolio, but it will contribute significantly to our revenue growth as we move forward. Okay, got you. And maybe I'll just follow-up here because I know we're asking a lot about breaking out bread metrics on and so on. But I think the reason that we're asking is because when we look at these other buy now pay later guys with their amazing equity valuations, We're trying to do some of the parts and maybe argue for Alliance Data to get some of that nice valuation as well. So maybe last question, but just kind of a broad one. When you think about yourselves versus the competition, why should ADS maybe have that higher multiple? What advantages do you bring? Do you think there's going to be consolidation where you win out in terms of taking market share from the rest of the guests. Maybe you can help us out there. Thanks Sure. So I think a few things that should be considered when we think about bread and the valuation. One is that the other is we're a bank. We have a strong balance sheet. We have good funding capabilities. That's a positive as we move forward. So we have that discipline of that public company with that heart of the FinTech. That's a nice combination. We're profitable. We know how to drive profitability. We know how to underwrite. We've been at it a very long time, and so we know how to underwrite through the cycle, good times and bad times. We know how to manage that. Know how to manage collections. We know how to manage receivables end to end. That's important as think about cycle over the long term. So I really feel good about those types of things. We're at the end of the day, we're a payments company and this is a payment type and we know how to manage that very well. So those are the things quite frankly I see as benefits to us. We have a strong balance sheet that's getting stronger. That's what we're focused on. And managing receivables is what we've been doing for twenty years. We know how to do it. We know how to do it well and we'll continue to give the individual right products at the right time because we have such great data and analytics. And so that combination should really help the analysts think through what the valuation of this acquisition is for ADF. Great. That's very helpful. Thank you. Your next question comes from the line of John Sakai from Evercore ISI. Good morning. On the receivables growth, high single digits, I know you indicated you expect that you could exceed that level in 2022, I think you mentioned. So if you could talk about perhaps maybe the level that you think is the upside to that high single digit where that could be and what are the drivers for the better expectation for 2022? Thanks. Sure. So to be clear, 2022 is average receivables. To be clear what that is, that's $20,000,000,000 of average receivables in 2023 as we move forward. And the upside there is a little take rate and bread. There's always an inorganic growth in terms winning a portfolio, winning a new partner, that gives us some upside. I think those are the areas where I look to upside as we move forward. A booming economy also helps us in terms of upside. Those are the three areas I see us getting maybe a boost in that estimate of $20,000,000,000 So $20,000,000,000 high single digit growth, low double digit growth, feel confident about that in terms of average receivables in 2023. And the opportunities with bread and the opportunity opportunities with potential new partnerships because we have a basket of products always is contributes to upside. Got it. Okay, thank you. And then again on the bread side, on the merchant discount rate there, is there a way you can maybe help us think or size up the discount rate or at least give us a range? I know there might be for competitive reasons, it's tough to disclose, but is there a way to help us think about the merchant discount rate that you're getting on your brand relationships or at least a range? Yes. A hard to disclose, but I will say we are very competitive because then we price on relationship, not on product. So our view is we'd be very competitive. We're not going to price low and because we're not going to do that, we have responsible economics, it will be competitive in the marketplace. But we do price our relationships, that gives us an advantage in terms of take rate. But let me ask Val her perspective. Yes. Would just expand on that to your point, Ralph. We price for relationships. We also price for value. And we do offer a differentiated product offering because of the data analytics that surround and allow us to present products at the right time and most relevant for that consumer. And we also have the white label offering which is unique in the market and helps our partners grow their equity and brand as a result of that. So we have some differentiators, we price for those differentiators And when you create value, you get paid for the value. Great. Could I ask just one more? If you could update us on the partner renewal front? I believe you have indicated in the past 40% of your renewals will be before 2024, '60 percent thereafter. Maybe if you could give us a little bit more color there on the update on what you're seeing if there are any other renewals that you flagged that may be at risk of going elsewhere in the near term? Thanks. Yes. So we're doing really well on partner renewals. And I think the resurgence of digital and products has really helped them move forward in terms of demonstrating to the partner how we can grow the pie for both of us, for both us and the partner. We announced that we're losing a partner, $05,000,000,000 of receivables. That is already within our forecast. Like I said, nobody likes to lose a partner, but it was something that happened and we can't go back. So we're moving forward. We think we have partners to fill that gap and products to fill that gap, so to drive incremental receivables. But in terms of other announcements, we don't see any other major partners leaving us at this point. Got it. Great. Thanks for taking my question. Your next question comes from the line of Ryan Nash from Goldman Sachs. Your line is open. Hey, good morning guys and thanks for all the color during the presentation. Maybe going in a different direction to some of the other questions. So Ralph, on Slide 19, you gave us a nice breakout of credit sales and you talked about greater than 40% coming in the form of online sales. And that's even with the expected ramp up of traditional channels. So can you maybe just talk about how do you where do you see the underlying partner mix evolving from here? Are you where you'd like to be? That had been this huge move for the company sort of off mall historically. And I'm wondering where are we in that journey at this point? Yes. I always think there'll be a place for the mall shopper in the mall shopping. And it's a good place for us, whether the customer buys at the mall or they go home and buy online. I think the malls are evolving to be more a showcase and a gathering place and demonstration of what products can do when they buy online. But it's also a good place for us to acquire customers. And we have some really slick technology with QR codes to acquire customers right in that space. So I don't think that mall is going to go away in any time soon. It continues to evolve. It was different five years ago. It's different now. I'm very comfortable with the new verticals, whether it be you know, in pet home improvement and the and and getting digital merchants on board in a very short period of time. That also drives sales. But I I like them. So why you know, why I think it will it will remain around 40%, maybe a little higher, but the pot's going to grow. So we'll see sales grow in the malls, we'll see sales grow online, but that mix may stay consistent. But I feel good about the partners we're adding and the bread partners we're adding every quarter. We add new partners. As malls open up, we're seeing better foot traffic, we're seeing better acquisitions and we're seeing better sales. So I don't think it's going be a deterrent from online, it's just going to be additive. The denominator is going to be bigger. Got it. Maybe one question on the financial side. So post the spin, at least on our math, you're going to reach TCE levels that are pretty close to the peers, but I guess you'll still likely have more debt. So can you maybe just clarify for us, I know you talked about it in your prepared remarks, once you reach those TCE levels, how do you foresee the priority shifting? Do you think it will be more of a hybrid of continuing to pay down debt and repurchasing? And is there a certain level of debt you or is there a certain level of debt you want achieve before opening up for share repurchase? Maybe just help us with how to think about the evolution of the capital structure. Sure. So as I said in my prepared remarks, our capital priorities haven't changed. We're going to continue to invest in the business. I think that's critically important. I think we haven't invested in a while. That's why you're seeing us upping the investment in the business. In terms of our debt, I like the fact that we can pay down debt and the spin helps us do that and gets us closer to our peers in terms of ratios. You know, we'll continue to do that. You know, in 2022, when we have we'll we'll we'll think through, you know, how do we want to return capital and value to our shareholders, whether we increase our dividend, talk about share repurchases. But I think that's the right time to do it. Our balance sheet get a bit stronger. I think we get a boost from the spin. And then good consistent earnings also gives us a boost and good expense management. And all of that put together, we can consider how we return value to our shareholders and what type. Great. And if I could squeeze in one last one. You talked earlier in the presentation about the Comenity Card. I was just wondering what are the opportunities to expand that? I mean, clearly, big focus today has been private label and brand. But just wondering what are the aspirations for the product? Could we move more to a hybrid structure like we see some of the competitors where your customers can get more upgrades to that product and sales? How do you think about that product evolving over time? Yes. Let me I'll start and then I'll turn it over to Val. I am very pleased with the establishment of the Comenity card. If you think about in the past, we would, you know, a partner would either leave us or bankrupt go bankrupt and we have to wind down the receivable, which was always painful. Now we have a product. You know, it started as a save product to save those to save that that that customer and really worked well so much so so well that we think there's an opportunity for us to go to fund it and grow that product. And I've asked Val to keep a watchful eye and determine our growth for that product. So I'll let her just chime in. Yes. Thanks, Ralph. So it is a product that we continue to invest in and continue to see growth. We've seen pretty significant growth already in uptake, particularly from our millennial population who has been very engaged. That product has moved to top of wallet. We see cross category shopping continue to improve and so it is an area that we'll continue to focus on in the market. Thanks for the color. Your next question comes from the line of Michael Young from Truist Securities. Your line is open. Hey, thank you for taking the question. I wanted to follow-up kind of on the ROE question that was previously asked and just ask if there's kind of over the medium or longer term, any focus or change in terms of on balance sheet risk taking versus off balance sheet risk taking and the ability to become more capital efficient from that perspective? Yes. I'm comfortable with our capital plan and how we're thinking about growing getting to our mid to double high 20s ROE. I think it's a combination of having a good receivables base, driving that revenue being very maniacal about our expense management and driving that and ensuring that we have the right amount of capital. We're not overcapitalized and undercapitalized, we have the right amount of capital as we move forward. So I'm a big believer of strong balance sheet and keeping things on balance sheet and being well capitalized but not overcapitalized and achieving those achieving that our goal from an ROE perspective. Okay. So more steady state kind of the current business then I guess the other question would just be with kind of the new bread platform. Is there an ability to go after maybe non financial institutions, but maybe more merchant platforms that can use buy now pay later solution to have smaller merchants? So any thought around that, something like a Shopify type platform? Yes, there is. I mean, I think we have a really slick technology platform and we're demonstrating that with RBC. I think the rollout of that platform to some non financials is certainly within our opportunity set. Val? Yes. And we do continue to grow in that space. So we do have some relationships today, including with Shopify and BigCommerce. And so we'll continue to look at those as we continue to look to grow in that small merchant category. Okay, great. And one last one for me. Just as we look at kind of strategic priorities, mentioned more share repurchase and dividend in terms of capital return. We've had the acquisition and the divestiture. Anything else that you see as maybe a product gap or interest on the M and A front, or technology platform, etcetera, that we should kind of just have in the back of our minds going forward? What I really like about, where we are today is I don't see any big gaps. I think we've closed a lot of the gaps, whether it's digital buy now, pay later installment loan. I think we've kind of closed those gaps down. I think we've put a leadership team together, both existing and new, that's very focused on the marketplace and focused on the horizon. I feel good about that as well. I also feel good about our ability to pivot if we have to. So if there's an opportunity in the marketplace, there's something on the horizon, we could drive to it because we're flexible and agile. So I don't see any big gaps in our product offering now. I think we have a pretty substantial product offering. But if there's something on the horizon and we see something out there, our ability to respond quickly is really a competitive advantage for us. Okay, great. Thanks for all the color. Your next question comes from the line of Meng Zhao from Deutsche Bank. Your line is open. Great. Thank you for taking my question. Ralph, you and your leadership team have done a pretty tremendous job so far on the transformation of the company. I guess one overarching question I had is what keeps you up at night? What are I guess some potential pitfalls that you currently see or are concerned about that could derail some of the growth that you and your team have talked about today? Thanks. You know, think when I was talking to John, he talked about, you know, taking over during the pandemic, and I said I joked I had three good weeks. You know, the pandemic keeps me up at night. What's going to happen? Are the vaccines going work? What do the variants look like? Are the malls going to stay open? That's still very present in my thinking in terms of how things move forward. Is this a stutter step or are we back to normal? Those things keep me up at night and how we have to adjust accordingly. And I think we've adjusted accordingly. With digital, we've answered that and we've pivoted. But those things keep me up at night. You know, this health and safety of our associates. We have an associate base in India, in Bangalore, making sure they're safe and healthy and able to perform. That keeps me up at night. So pretty much the traditional things, but really a hangover from the pandemic is what continues to worry me a little bit. But I think we've answered that very well. I think we're very focused on our future. We have the right products and the right tools to move forward. But there is that always keeping one eye on what's happening with the pandemic. Great. Thanks. And secondly, Ralph, the team has mentioned the focus on tech investments and use of data to track sales, consumer uptake and in partnerships. Could you sort of speak to how ADS looks to protect consumer data and sort of mitigate any potential cybersecurity issues that might provide? Yes. So we are is job one for us, protecting our customers' privacy, and we're very focused on that. We've got we've built our privacy mode, and we'll continue to do that. We are very focused on the latest technology to prevent cyber attacks. We monitor them on a daily basis, and we're you know, we have a team wrapped around that. That's critically important for us. That's job one. That investment, among all other investments, comes first, is to keep the privacy of our of our customers and protect that privacy. Great. Thanks for taking my questions. Your next question comes from the line of Dominique Cabrillo from Oppenheimer. Your line is open. Hey, great presentation and thanks for taking my questions. So I think the white labeling is key to all this and traditionally ADS is focused on implementing their capabilities when typically small and then ADS grows with the partner over time. And you did a great job showcasing your capabilities for SMBs. But do you think some larger partners today and given your full suite of products now with Brett, could you actually target larger established RFPs on a more regular basis? And could this become a part of the growth as we move forward? Thanks. Mike, thanks for the question. And the answer is yes, but selective big partners. We're not going go after every big partner. We're going to go after partners that make sense for us, partners that are profitable for us. We're really focused on responsible economics. So when we go after an RFP with our basket of products, we're ensuring that the returns are there for us that makes sense. Val's team is very focused kind of looking at what's in the marketplace and what is one, profitable for us, but two, that we have a high probability of getting and how that fits into our portfolio and the portfolio we want to grow for the future. Val? Yes. Thanks, Ralph. I think with the investments that you said we've made across the products, the digital, the data and analytics, all of that really wraps itself nicely into being very competitive in some of those more mid market, higher market deals and but keeping very maniacally focused on deals that will be accretive and profitable for the business. The last thing I would say too is because we're agile and ability to pivot, we can get to market quicker and make decisions quicker probably from our larger competitors. Well, we have less bureaucracy and we could make decisions in a reasonable amount of time and work with a partner to get to a solution. I think that's again a competitive advantage of ADS. Okay, great. And maybe just one more follow-up. You mentioned and we haven't really talked in the Q and A yet on the funding mix actually and that going to 50% over time. Can you just talk about how that trends over the years and how long it takes to hit your target there? And then when you think about the combination of flat yields and this mix towards funding inside and outside of rate hikes, could the NIM expand for ADS as we move out in out years? Thanks so much. Yes. I'm bullish on deposit collection. I think we've done a nice job. I think there's more opportunity there. We've just scratched the surface in terms of marketing, in terms of products we offer. So I'm very excited about it. We've proven we can do it. We have a good platform. And we could do it at gathering deposits at probably less of a cost than some of our bigger competitors because it's digital. So it will impact our funding going forward. I think it won't be dramatic. You'll see some improvement in yields. It won't be a dramatic improvement. But over the next I anticipate over the next few years that we'll up our deposit game quite a bit. Great, thanks. Your next question comes from the line of Reggie Smith from JPM. Your line is open. Hey, good morning. Thanks for taking my question. Can you guys hear me? Yes. Perfect. I have two questions. One, so I appreciate the disclosure and it looks like the interface for Bred is pretty slick. I noticed that you guys had, at least in the demo, there was like a little blurb about powered by bread. And I'm kind of curious how you think this whole thing evolves. I know some of your partners today accept, Have to Pay and Affirm and things like that. Curious how you think it ultimately evolves from the perspective of multiple buy now pay later offers being presented to clients or customers rather and how you win in that realm, why they would choose bread versus something with maybe a bigger brand name? I'd start there and let you guys kind of move on that for a second. Yes. Again, will answer and I'll turn it over to Val in a second. So I think the white label solution is the key competitive advantage. If you're in a buy flow or the purchase flow and we serve up a way to pay, that is during your decision. It's not after you've decided to buy and you have to punch out to one of our competitors. We have your information. We pre fill your information. You're already approved. So I think that gives us that competitive advantage. Again, pricing and the ability for us to offer a good price to a customer because we know more about that customer than a third party who's just meeting that customer for the first time helps us in terms of targeting them with the right product at the right time. So I think we have that advantage because bread is a white label solution as well. Belle? Yes, I totally agree, Ralph. And I think the other piece of that is when you offer all of the products together to a merchant, you have the opportunity to then move from a product that can be more transactional to one that drives more loyalty. So we have an opportunity to also upgrade clients and move them. They might come in on a buy now pay later product because of the data that we have, we can very specifically target to move them into a private label or co brand and really drive that incremental loyalty for the client. Reggie, it's different between a transaction and a relationship with the customer. And we have that relationship with the customer that gives us a good competitive advantage. Got it. So just should I'm hearing this correctly, it sounds as though you guys feel like, bread will be presented earlier on in the purchase process. And obviously, there's an incentive for the retailers to use you guys over Affirm and Afterpay. But I guess drilling down a little bit deeper like from a consumer perspective, do you got a plan on increasing the brand marketing for bread so that it resonates with consumers at all? Because it's too sad. Obviously, the merchants can want to promote bread and can want people to use bread, but like how do you get a consumer that may have seen your competitors and maybe more aware about those guys to select you guys or how are you guys thinking about that? Yes. I like the bread brand. We'll continue to promote the bread brand. And it has a reputation and we're going continue to we're going to trade on the reputation as well. And you'll see that you won't see that brand go away. You'll see it in the marketplace. And you'll see it prominently in the marketplace. Val, anything to add? Yes. I think also it's equally important for our clients is that we offer choice. Because we can do both the white label and brand it in their own look and feel as well as branded bread, it does provide that choice. And so our clients can manage that message in terms of which type of product they want to position to their customer. Got it. Perfect. And then I have one kind of balance sheet question. You guys have talked about, I guess, some of your ratios looking more like your peers. I was hoping that you could kind of level set and be a little more specific there kind of what ratios in particular, what are the numbers you're kind of driving towards and kind of where you are now? Obviously your balance sheet has a number of intangibles as well and things like that. Just want to kind of level set to make sure that we're all on the same page there. Yes. So I look at it to be competitive with the low teens, high single digits, teens. We're going to get there over time. I think the spin gives us a step change, and then we will continue to add to our tangible common equity with good earnings, good expense management and thoughtfully returning value to our shareholders. But that like high single digits, low teens is where we're going to be. You're talking about equity to Yes. We got it. Tangible common equity, yes. Perfect. And if I can sneak one more question. I look at your cash balance, it's definitely come down in recent quarters. Is there some ratio of cash to receivables we should be thinking about? Or is there anything that's restricting from lowering or reducing the amount of cash? Yes. You should see our cash balance strengthen a little bit as we move forward. Perfect, thank you. Great presentation. Thanks for the disclosures. Thank you for asking questions. Appreciate it. Are no further questions at this time. I turn the call back over to Val Vendretta. Thank you. Well, first thing I want to do is thank both Val and Tammy for their excellent presentations today. They did an excellent job. I hope you've all enjoyed today. We had fun doing it. It was important for us to introduce our strategy, to introduce our team and to focus on the new products we have in the marketplace and most of all, to be transparent to our investors as we move forward. So thank you all for your time. Thank you for your attention. Thank you all for your questions. And we are looking forward to the rest of this year and moving into 2022.

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